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NatWest share price is on the cusp of a 10% drop as earnings miss

By: Invezz

NatWest (LON: NWG) share price came under pressure as concerns about the company’s growth continued. This sell-off accelerated after its Q3 results missed analysts’ estimates as the benefits of higher interest rates waned. The stock plunged to a low of 205.8p on Thursday and is sitting at the lowest level since October last year.

NatWest woes mount

NatWest has been an embattled company this year. It recently made headlines after the company’s Coutts brand debanked Nigel Farage, a vocal British politician. 

And now, there are signs that the scandal is denting its performance. In a statement, the company said that its profit metrics were lower than its previous guidance. The management cited the fading impacts of higher interest rates as customers moved to higher-yielding products.

NatWest’s profit came in at £866 million while the return on tangible equity rose to 14.7%. Its net interest margin rose to 3.4% because of higher volume growth and interest rates, which sits at the highest level in years.

The rising interest rate environment has led to more hardship among its customers. As a result, the total impairments increased to over £229 million. Net loans to customers jumped by £1.8 billion to £354 billion. NatWest ended the quarter with a Common Equity Tier 1 (CET) ratio of 13.5%.

The challenge for NatWest and other British banks is that the British economy is slowing. In a recent report, the IMF noted that NatWest will be the slowest-growing economy in the G7. Inflation has remained higher than other countries while many companies are dealing with the impacts of Brexit.

This view was reflected in the company’s forward guidance. It expects that its total tangible ROTE will be between 14% and 16%. It sees its total income excluding notable items to be £14.3 billion. These figures were much lower than what analysts were expected.

NatWest share price forecast

NWG chart by TradingView

The weekly chart shows that the NWG share price has been in a strong bearish trend in the past few months. It has crashed below the 38.2% Fibonacci Retracement level. Most notably, the stock has moved below the 50-week and 200-week exponential moving averages (EMA).

At the same time, the MACD has crashed below the neutral point. The histogram of the MACD is also beneath this neutral level. Also, the Relative Strength Index (RSI) has pointed downwards. It has also formed a head and shoulders pattern and moved below the support at 231p (December 2019 high).

Therefore, the shares will likely continue falling as sellers target the 50% Fibonacci Retracement level at 187.10. This price is about 10% below the current level.

The post NatWest share price is on the cusp of a 10% drop as earnings miss appeared first on Invezz

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